A new bill in the California State Senate could make it easier for developers to move forward on multifamily projects across the state.
Sen. Dave Cortese, who represents San Jose, recently filed SB 750, which would allow the state to use its credit to insure construction and permanent loans for multifamily housing. The proposed legislation has already passed the Senate’s Judiciary Committee and has the backing of several housing groups and Cortese’s fellow senators, The Mercury News reported.
Market-rate multifamily housing construction in San Jose came to a screeching halt last year, leading it to lean on incentives to help developers overcome high interest rates and increasing material and labor costs to get projects moving.
That isn’t enough, according to Cortese. By using government credit, the state would work in tandem with developers “so that projects that are just on the bubble suddenly reach the tipping point and can break ground.”
Under Cortese’s proposal, the California Housing Finance Agency would use the state’s credit to guarantee the loans while simultaneously generating revenue from premiums to cover the costs of the program.
“We must make it faster, cheaper and easier to build these units at a range of income levels by using the state’s credit to provide financial guarantees,” Corey Hebert, a senior associate at Ethos Real Estate, told The Mercury News. “SB 750 will lower the cost of capital as well as reduce financing layers and de-risk larger projects, which will really bring a lot of affordable housing providers who may be on the sidelines due to high interest rates back to the table on both the public and private side of the coin.”
While California mandated that local jurisdictions build 277,523 very low-income units in the last housing cycle, only about 20 percent have been issued permits. At the same time, local jurisdictions permitted about 30 percent of the nearly 185,000 low-income units required by the state.
In the Bay Area, local governments must plan for 180,334 new affordable homes by 2031. This includes 50,923 in Santa Clara County.
As it stands, state law bars the legislature from creating any debts or liabilities exceeding $300,000. SB 750 is moving forward at the state Capitol, but officials will need to draw up a companion bill and ballot initiative to amend the California constitution if they want to implement the plan.
— Chris Malone Méndez
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